One of Australia’s largest insurers Suncorp has announced a significant retreat from fossil fuels, declaring it will not directly finance or insure new oil and gas projects.

The Brisbane based insurer said it will also phase out financing and underwriting for all oil and gas exploration or production by 2025.

The move, announced at Suncorp's financial results, comes after the company announced last year it would abandon thermal coal by 2025 and after shareholder activists put forward a resolution calling on the company to abandon coal, oil and gas assets, “consistent with the goal of the Paris Agreement to limit the increase in global average temperature to 1.5°C.”

That resolution, championed by the group Market Forces which campaigns for financial divestment from fossil fuel interests, won 8 percent support at the company's 2019 meeting.

In her statement in the report Suncorp chairman Christine McLoughlin said that last year's “relentless drought” followed by the Covid pandemic had highlighted, “long-term implications for our economies and environment."

“This year we deepened our understanding of the strategic and financial risks and opportunities presented by the changing climate through comprehensive scenario analysis. The insights gained will help us manage risks posed by the increasing severity of natural hazards, act on new and emerging opportunities, and support an orderly transition to a net-zero emissions economy.”

In January Suncorp revealed that fire, rain and hail disasters had cost it $300 million in the first half of last financial year.

Market Forces campaigner Pablo Brait welcomed the announcement. “We know that Suncorp is aware of climate change and the impact it is having on its profits. It is good to see it taking the issue seriously,” he said. “Over the past couple of years we have seen a big move away from coal and now it is happening in oil and gas. New scientific evidence shows that if you consider the methane leaked as part of gas extraction it is as bad [for the climate ] as coal."

Under Suncorp’s responsible investment policy detailed in this year’s earnings report the company will now require its external investment managers to apply a “shadow carbon price” in their analyses of investment opportunities to reduce the risk of backing stranded assets as the economy is decarbonised, said a company report published on Friday.

Suncorp will immediately end insuring new oil and gas projects. It will phase out direct investment in oil and gas exploration and production companies entirely by 2040, with shares in the most polluting 10 percent dumped immediately, the most polluting 25 percent by 2025 and the top 50 percent by 2030.

Under Suncorp’s responsible investment policy detailed in the report the company will now require its external investment managers to apply a shadow carbon price to their analysis of investment opportunities to manage the risk of stranded assets as the economy is decarbonised.

As of June 30, fossil fuel extraction and electricity generation activities made up less than 0.1 per cent of Suncorp’s general insurance gross written premium, less than 0.5 per cent of its insurance and shareholder investment assets, and less than 1.5 per cent of its total investment assets under management.